EXHIBIT 10.1


 


	
  

  	
  Short-Term Incentive Plan (STI Plan)

  Terms and Conditions for Managers

  	
   

  



 


Compensation Philosophy


 


Cubist’s compensation
philosophy is to attract, motivate, retain and reward employees with base pay,
short-term and long-term incentives, and benefits that competitively target the
market.  Cubist’s compensation programs
provide employees with the opportunity to earn increased compensation – if
Cubist and employees achieve or exceed pre-established performance targets.


 


Plan Overview


 


Cubist’s Short-Term
Incentive Plan (“STI Plan”) is a bonus plan for managers and certain key
individual contributors (as designated by senior management, and is designed to
reward participants (“Participants”) for their roles in the achievement of
Cubist’s annual goals, as established by the Company (“Annual Goals”).  STI Plan awards (“Plan Awards”) are
determined on an annual basis, based on whether and to what extent Cubist
achieves its Annual Goals and each Participant achieves the Participant’s
individual goals for the relevant calendar year (the “Performance Period”).


 


Plan Objective


 


Our intent through the
STI Plan is to provide highly competitive total cash compensation through an
annual variable pay program that reflects Cubist’s performance and Participant
performance against goals and objectives. 
The STI Plan is an important variable component of the total
compensation package designed for managers and other key individual
contributors designated by senior management as eligible to participate in the
STI Plan.


 


Eligibility


 


Managers and certain key
individual contributors designated by senior management are eligible to
participate in the STI Plan. 
Participation in the STI Plan in one year does not automatically
guarantee participation in a future year.


 


Performance
Periods


 


Each calendar year,
beginning on January 1 of each year, constitutes a separate Performance
Period.


 


Financial Measures


 


Prior to the beginning of
each Performance Period, the Company will establish financial measures and
weightings for each of the Company’s Annual Goals. Cubist needs to achieve at
least 70% of its Annual Goals for any Participant to be eligible for a Plan
Award. For 2005, company achievement will be capped at a 200% payout.  In addition to achievement of Annual Goals,
Plan Awards are also determined on the basis of individual objectives.


 


Individual Objectives


 


As part of Cubist’s
annual (or in the case of Participants who join the Company after the
commencement of a Performance Period, ongoing) goal setting process, each Participant
should propose individual objectives for his or her manager’s approval. Each
Participant will be measured by his or her manager against these objectives,
and the manager shall make a recommendation to the CEO as to whether the
Participant should receive a Plan Award, and, if so, the amount of such Plan
Award (assuming Cubist’s Annual goals have been achieved to the requisite level
noted above.


 





















 


Funding


 


After the end of each
Performance Period, the CEO shall determine the aggregate amount available for
Plan Awards (if any) based on the Company’s performance relative to the Annual
Goals (the “Pool”).  Assuming the Company
has achieved the requisite performance level, the CEO shall then determine the
award and amount of any Plan Awards to the Participants in accordance with the
STI Target Percentages noted below; provided that the Compensation Committee of
the Company’s Board of Directors shall make such determinations with respect to
the CEO’s bonus and shall approve the CEO’s recommendations with respect to the
Executive Officers bonuses.


 


Calculating the Amount of Any Target Award


 


Each Participant
is eligible for Plan Awards at a target percentage of base salary (“Target
Percentage”) as listed in Figure 1 below. The “Target Award” is the Participant’s
target percentage, multiplied by his or her base salary for the Performance
Period. The Target Award will be pro-rated based on the portion of the
performance period worked by the Participant if the Participant (a) commenced
employment with Cubist after the commencement of the Performance Period, (b)
worked part-time during the Performance Period, or (c) took a leave of absence
during the Performance Period.


 


Figure 1: Target Percentage by Level


 


	
  Eligibility Group

  	
   

  	
  Target Percentage

  (as % of base salary)

  	
   

  
	
  CEO

  	
   

  	
  50

  	
  %

  
	
  Senior Vice President

  	
   

  	
  40

  	
  %

  
	
  Vice President

  	
   

  	
  32

  	
  %

  
	
  Executive Director

  	
   

  	
  20

  	
  %

  
	
  Senior Director*/Director

  	
   

  	
  15

  	
  %

  
	
  Senior Manager/ equivalent individual contributor

  	
   

  	
  15

  	
  %

  
	
  Manager/ equivalent individual contributor**

  	
   

  	
  7.5

  	
  %

  



 










*Target Percentage for
Senior Directors shall be 15% for 2004, and 20% for years 2005 and beyond


** Target Percentage for
Manager/equivalent individual contributors shall be 7.5% for 2004, and 10% for
years 2005 and beyond.


 


Figure
2: Target Award Calculation Examples


 


	
  Level

  	
   

  	
  Full-time or

  Part-Time

  	
   

  	
  Base Salary

  	
   

  	
  Target

  Percentage

  	
   

  	
  Pro-Ration

  Factor

  	
   

  	
  Target Award

  	
   

  
	
  Senior Director

  	
   

  	
  Full Time

  	
   

  	
  $

  	
  120,000

  	
   

  	
  15

  	
  %

  	
  100

  	
  %

  	
  ($120,000 x 15% x 100%)=

  $18,000

  	
   

  
	
  Manager

  	
   

  	
  Part Time

  (20 hours/wk)

  	
   

  	
  $

  	
  75,000

  	
   

  	
  7.5

  	
  %

  	
  50

  	
  %

  	
  ($75,000 x 7.5% x 50%)=

  $2,812.50

  	
   

  
	
  Senior Manager

  	
   

  	
  Full Time

  	
   

  	
  $

  	
  90,000

  	
   

  	
  15

  	
  %

  	
  100

  	
  %

  	
  ($90,000 x 15% x 100%)=

  $13,500

  	
   

  



 


Calculating Actual Awards


 


A Participant’s Actual
Award is calculated in two portions, which are then added to form the Actual
Award.  The first portion is tied to
company results, while the second portion is tied to the Participant’s
performance against goals as assessed by the participant’s Manager.  As the Participant’s level of responsibility
in the organization increases, the portion tied to company results increases
and the portion tied to individual results decreases, as listed in Figure 3
below.  Actual Awards are subject to
approval by the CEO.  In addition, Actual
Awards for Executive Officers are subject to approval by the Compensation
Committee.


 


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Calculation
of portion tied to company results:


 


The Participant’s Target
Award is multiplied by the portion (percentage) tied to company results as
listed in Figure 3 for the Participant’s eligibility group.  That number is then multiplied by Cubist’s
achievement against the Annual Goals.


 


Calculation
of portion tied to individual results:


 


The Participant’s Target
Award is multiplied by the portion (percentage) tied to individual results as
listed in Figure 3 for the participant’s eligibility group.  That number is then multiplied by the
percentage of individual goals met by the Participant as assessed by the
Participant’s Manager.


 


Calculation
of Actual Plan Award:


 


The Actual Award is the
sum of the portion tied to company results and the portion tied to individual
results.


 


Figure 3: Portions Tied to Company and Individual
Results


 


	
  Eligibility Group

  	
   

  	
  Portion Tied to

  Company

  Results

  	
   

  	
  Portion Tied to

  Individual

  Results

  	
   

  
	
  CEO

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Senior Vice President*

  	
   

  	
  50

  	
  %

  	
  50

  	
  %

  
	
  Vice President

  	
   

  	
  40

  	
  %

  	
  60

  	
  %

  
	
  Executive Director

  	
   

  	
  30

  	
  %

  	
  70

  	
  %

  
	
  Senior Director**/Director

  	
   

  	
  20

  	
  %

  	
  80

  	
  %

  
	
  Senior Manager/ equivalent individual contributor

  	
   

  	
  20

  	
  %

  	
  80

  	
  %

  
	
  Manager/ equivalent individual contributor

  	
   

  	
  10

  	
  %

  	
  90

  	
  %

  



 










* For 2004, for Senior
Vice Presidents, the “Portion Tied to Company Results” shall be 50%, and the “Portion
Tied to Individual Results” shall be 50%. 
For 2005 and beyond, the “Portion Tied to Company Results” shall be 60%,
and the “Portion Tied to Individual Results” shall be 40%.


**For 2004, for Senior
Directors, the “Portion Tied to Company Results” shall be 20%, and the “Portion
Tied to Individual Results” shall be 80%. 
For 2005 and beyond, the “Portion Tied to Company Results” shall be 30%,
and the “Portion Tied to Individual Results” shall be 70%.


 


Figure 4: Actual STI Plan Award Calculation Examples


 


	
  Level

  	
   

  	
  Target

  Award from

  Figure 2

  	
   

  	
  Company

  Results

  	
   

  	
  Individual

  Results

  	
   

  	
  Portion tied to

  Company

  Results

  	
   

  	
  Portion tied to

  Individual

  Results

  	
   

  	
  Actual STI Plan

  Award

  	
   

  
	
  Senior Director

  	
   

  	
  $

  	
  18,000

  	
   

  	
  85% of target

  	
   

  	
  80% of goals met

  	
   

  	
  $18,000 x 20% x 85% = $3,060

  	
   

  	
  $18,000 x 80% x 80% of goal = $11,520

  	
   

  	
  $3,060+$11,520 = $14,580

  	
   

  
	
  Manager

  	
   

  	
  $

  	
  2,812.50

  	
   

  	
  100% of target

  	
   

  	
  100% of goals met

  	
   

  	
  $2,812.50 10% x 100% = $281.25

  	
   

  	
  $2,812.50 x
  90% x 100% of goal = $2,531.25

  	
   

  	
  $281.25 +
  $2,531.25 = $2,812.50

  	
   

  
	
  Senior Manager

  	
   

  	
  $

  	
  13,500

  	
   

  	
  125% of target

  	
   

  	
  100% of goals met

  	
   

  	
  $13,500 x 20% x 125% = $3,375

  	
   

  	
  $13,500 x 80% x 100% of goal = $10,800

  	
   

  	
  $3,375 = $10,800 = $14,175

  	
   

  



 


Employment Changes


 


•                  New
Hires:


 


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•                  If a Participant is hired during a
Performance Period, his or her award will be pro-rated to reflect the portion
of the year actually worked with Cubist, subject to the pro-ration guidelines
as described below


 


•                  Changes in Eligibility:


•                  If a Participant changes from one
eligibility group to another, or an individual who was not a Participant at the
commencement of the Performance Period changes to a Plan-eligible position
within the Performance Period, the amount of any Plan Award will be determined
by calculating the amount of time worked in each eligible position—subject to
the pro rata guidelines noted below.


 


•                  Part-time:


•                  If a
Participant is not a full-time employee, any Plan Award to the Participant’s
shall be pro-rated based on the Participant’s regular scheduled work hours. If
a Participant has a change in regular scheduled work hours during a Performance
Period, the Participant’s Plan Award shall be pro-rated in accordance with the
pro rata guidelines below.


 


•                  Pro-rata Guidelines:


•                  All pro-rata adjustments occur on a
whole calendar month basis


•                  Changes occurring prior to the 16th
of the month will be effective on the first day of the month


•                  Changes occurring on or after the 16th
of the month will be effective on the first day of the following month


 


•                  Departure or Termination:


•                  If a Participant’s employment
terminates prior to the end of a Performance Period, the Participant shall not
be entitled to a Plan Award unless such termination is as a result of
Participant’s death or retirement, or a Participant becomes disabled, in which
case the Participant, or the Participant’s estate (as the case may be) shall be
eligible for a pro-rated Plan Award payable on the standard payment date for the
Performance Period (as opposed to an earlier date).


•                  If a Participant’s employment
terminates after the completion of the Performance Period but prior to the date
that Plan Award payments are made (the “Payment Date”), a Participant shall be
eligible for a Plan Award, unless such termination is as a result of an
involuntary termination for cause or misconduct.


 


STI award Payout Process


 


STI Plan Awards are paid
out following the end of the Performance Period and after the measurement of
Cubist’s achievement of Annual Goals has been completed.  Plan Awards will generally be paid out in the
first quarter following the end of the relevant Performance Period. Applicable
taxes other withholdings will be deducted from the Plan Award, as appropriate
for each jurisdiction. In the United States, contributions to the 401(k) Plan
as well as applicable taxes will be deducted from the award payment.


 


Glossary of Key Terms


 


Actual Award: the Plan Award
based on the sum of the portion of the Plan Award tied to company results and
the portion tied to individual results


 


Payment Date: the date that payments, if any, will
be made to Participants under the STI Plan


 


Performance Period: 
the twelve
month period beginning on January 1 of each calendar year


 


Target Award: 
the Participant’s Target Percentage multiplied by his
or her base salary for the Performance Period


 


Target
Percentage: the maximum amount of a Participant’s Plan Award
eligibility expressed as a percentage of such Participant’s base salary


 


The Company reserves the
right to amend or discontinue the Plan at any time without prior notice. In no event does this STI
Plan alter the “employment-at-will” relationship between Cubist and its
employees.


 


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Cubist
and its employees are free to terminate the employment relationship at any
time, without cause or notice.


 


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